3.68: Court options to deal with significant deficiencies
7.3: Summary Judgment (Application and decision)

Case Summary

The Defendant renovated the Plaintiff’s home pursuant to a construction contract containing a mandatory arbitration clause. Construction deficiencies were discovered in January of 2014 as a result of inspection by an expert. In March of 2014, the Defendant denied responsibility for the deficiencies.

The Plaintiff filed a Statement of Claim on May 2, 2014, but never filed a Notice to Arbitrate. The Defendant filed a Statement of Defence in June of 2014, specifically raising the mandatory arbitration clause as a defence to the Action. The Defendant did not, however, bring an Application for a stay of the Action (pursuant to section 7(1) of the Arbitration Act, RSA 2000 c A-43 (the “Arbitration Act”)) until April of 2016, just outside of two years following the Defendant’s denial of responsibility.

In considering the Application, the Court first acknowledged that section 7(1) of the Arbitration Act directs a stay of Court proceedings where the parties have agreed to arbitrate, subject to the exceptions listed in section 7(2). Master Schlosser reasoned that as the limitation period had expired and arbitration had not been commenced, the remedy in play was not merely a stay under the Arbitration Act, but rather, the striking of the Statement of Claim pursuant to Rule 3.68 on the ground of limitation. As such, the true issue was whether the section 7(2) exceptions circumscribed strict application of the limitation period.

Though mindful of the unsettled state of the law on this point, Master Schlosser was prepared to consider the section 7(2) exceptions post-limitation. The Court went on to find as fact that the Application had been brought with undue delay (section 7(2)((d)) of the Arbitration Act, and that the matter was fit for Summary Judgment (section 7(2)((e)) of the Arbitration Act pursuant to Rule 7.3. Accordingly, the Court refused to stay the Action.

In the event that a proper interpretation of the Arbitration Act precluded reliance on section 7(2) post-limitation, forcing the Court’s loss of jurisdiction over arbitration, Master Schlosser nonetheless held that the Court retained jurisdiction over the Action. Master Schlosser found that the Defendant, through its conduct, waived its right at law or in equity to rely on the arbitration clause, or otherwise attorned to the jurisdiction of the Court.

The Application was dismissed. On account of the unsettled state of the law, each party was to bear its own Costs.

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